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Jerry Geisel

Ford lump-sum pension conversion attracts 35,000 retirees

December 20, 2013 - 2:19pm

Ford Motor Co.

Ford Motor Co. said Wednesday that about 35,000 U.S. salaried retirees and former employees have accepted the automaker's option to take their monthly pension benefit as a cash lump-sum payment.

In all, about 37% of the more than 90,000 plan participants who were eligible for the annuity conversion program accepted the offer, Ford said. That takeup rate is a shade higher than that of General Motors Co., where about 30% of eligible salaried retirees converted their monthly annuities to a lump sum benefit in a similar benefit conversion program.

In all, Ford said it settled about $4.2 billion in pension benefit obligations through the conversion program.

Ford and GM were among the first employers to launch what has become known as pension de-risking programs.

When individuals take a lump-sum payment rather than continued monthly benefits, companies no longer face such risks as paying more than expected if the individuals live longer than anticipated.

Companies also do not face the risk of making additional unexpected contributions to their plans in the future to pay benefits if investment returns slump.

In addition, by reducing the number of participants in their pension plans through annuity buyout programs, companies pay less in premiums charged by the Pension Benefit Guaranty Corp.

And those premiums are headed up. Legislation given final congressional approval this week will boost the base premium to $57 per plan participant in 2015 and $64 in 2016. The base premium now is $42 per plan participant and will increase to $49 next year.

The legislation also will sharply increase the additional premium paid by employers with underfunded plans.